Assistance Listing Number: 10.728 Name of Federal Program: Inflation Reduction Act Hazardous Fuels Transportation Assistance Name of Federal Agency: Department of Agriculture Award Period: January 1, 2023 – December 31, 2023 Criteria or Specific Requirement: 2 CFR section 200.403 establishes criteria that must be met for costs to be allowable under federal awards. According to these criteria, costs charged to federal awards must be determined in accordance with generally accepted accounting principles and be adequately documented. Condition: Organization does have adequate segregation of duties between the individual reviewing, approving, and recording costs charged to federal awards. Cause: The Organization has not developed policies and procedures to ensure costs have been reviewed for allowability by appropriate personnel prior to charging them to federal awards. Effect or Potential Effect: An expense charged to the federal program could be disallowed. Repeat Finding: No Recommendation: We recommend that management implement policies and procedures to review and approve all costs by appropriate personnel prior to charging them to federal awards. Views of Responsible Officials: Management agrees with the finding and noted that they will implement our recommendations.
2023-002- Activities Allowed and Allowable Costs Federal Assistance Listing Number: 84.287C Name of Program or Cluster: Twenty-First Century Community Learning Centers Agency: U.S. Department of Education Name of Passed-Through Entity: State of New Jersey Department of Education Criteria: According to the 21 CCLC grant agreement’s terms and conditions, a grantee is required to maintain a financial management system that includes the following: (1) accurate, current and complete disclosure of all financial activities related to 21 CCLC’s grant agreement in accordance with generally accepted accounting principles (“GAAP”), (2) records clearly identify the source and application of all funds used for the purposes described in the approved grant application, (3) effective internal and accounting controls over all funds, property and other assets. The grantee shall have in place a system for safeguarding all such assets and shall ensure that they are used solely for authorized purposes. (4) a comparison of actual outlays with budgeted amounts. Financial information shall be correlated with performance and productivity data and shall result in unit cost information. (5) accounting records that are supported by source documentation, and (6) procedures for determining the reasonableness and allowability of costs in a manner that is consistent with the Uniform Guidance. Activities Allowed and Allowable Costs compliance requirements applicable to 21 CCLC include: (1) Expenditures must be allowable under 2 CFR §200.403 (federal cost principles) and align with the grant’s specific terms and objectives and (2) Documentation of expenditures must meet the standards outlined in 2 CFR §200.302 (financial management and internal controls). Condition: In September 2024, legal counsel conducted a formal investigation and identified a potential misappropriation of funds regarding a vendor who submitted twelve invoices for goods and services to be used by children in the after-school programs across three Paterson schools amounting to $94,560 during a nine-month period covering May 2023 through February 2024. According to the formal investigation, there was insufficient evidence that the Organizations actually received the goods and services purchased from this vendor as shipping receipts, purchase orders or other verification support were not provided. Payments were made to the vendor with only an approved invoice. Cause: The lack of proper support documentation stems from insufficient internal controls over compliance due to inadequate segregation of duties, training and understanding of federal grant compliance requirements by staff responsible for grant administration as well as weak management oversight. The Organizations’ grant program administrators lack proper segregation of duties. There should be different individuals responsible for initiating purchase orders, receiving goods, approving invoices, and processing payments. There is no consistent oversight over expense/vendor verification and proper documentation processes, which include purchase orders and receiving reports that must be attached to invoices for verification. Effect: The Organizations’ 21 CCLC grant program was not in compliance with the federal grant terms and conditions, which can result in a potential repayment or “clawback” of misused grant funds by the grantor due to unverified expenditures and also lead to audit penalties or loss of future funding. Questioned Costs: $94,560. Repeat Finding: No. Recommendations: We recommend that the Organizations implement policies and procedures to comply with the federal grant terms and conditions in an effort to provide proper support documentation for verification of the existence that goods were received and services performed. These policies include the following: Recommendation #1 – A policy implemented for deliveries that arrive at the Organizations and that are made directly to the schools (“Units”). The arrival of a delivery must be documented at the Organizations and any deliveries made to the Units must be documented by the Unit Director and/or the individual who is making the delivery. All receiving reports and receipts should be matched to an invoice. Recommendation #2 – The Organizations must renew and enforce its policies regarding documentation the Units are responsible for submitting to the Program Director and/or the Organizations to ensure supplies and materials are received as well as activities and events provided by grant funds are properly documented and maintained. (1) There must be a policy related to the use of daily reports (known as “End of Day Reports”) that Unit Directors submit to the Program Director. The reports should be a template created by the Organizations or Program Director that the Unit Directors have available to them, which must identify what activities occurred on that day, whether parents were provided with anything at drop off or given out to the children and whether the Units accepted any deliveries and from whom. (2) The Unit Directors must also maintain "sign-in sheets". A policy must also be implemented regarding the use of sign-in sheets at the Units. The policy should have a clear mandate, purpose and outline the significance of maintaining these sign-in sheets as it relates to the grant program. The sign-in sheets must contain the number of the Unit, the name of the Director and Assistant Director, the name and a description of the correlating activity or event, whether any items, supplies, materials or kits were given to the children during the activity or event or provided at pickup time for the children to use at home, the number of children that participated in the activity or event, as well as the date and approximate time. The sign-in sheets should be emailed to the Program Director who will need to save these sheets in an online file. These files must be kept separately in a repository for each specific Unit by grant year. Other documentation that should be kept on file to further support the events and activities that occurred includes pictures of the children using the materials or participating in the activity or event. Unit Directors must be required to submit these files to the Program Director within a specified amount of time following an event or activity. Views of Responsible Officials: See corrective action plan attached.
2023-002- Activities Allowed and Allowable Costs Federal Assistance Listing Number: 84.287C Name of Program or Cluster: Twenty-First Century Community Learning Centers Agency: U.S. Department of Education Name of Passed-Through Entity: State of New Jersey Department of Education Criteria: According to the 21 CCLC grant agreement’s terms and conditions, a grantee is required to maintain a financial management system that includes the following: (1) accurate, current and complete disclosure of all financial activities related to 21 CCLC’s grant agreement in accordance with generally accepted accounting principles (“GAAP”), (2) records clearly identify the source and application of all funds used for the purposes described in the approved grant application, (3) effective internal and accounting controls over all funds, property and other assets. The grantee shall have in place a system for safeguarding all such assets and shall ensure that they are used solely for authorized purposes. (4) a comparison of actual outlays with budgeted amounts. Financial information shall be correlated with performance and productivity data and shall result in unit cost information. (5) accounting records that are supported by source documentation, and (6) procedures for determining the reasonableness and allowability of costs in a manner that is consistent with the Uniform Guidance. Activities Allowed and Allowable Costs compliance requirements applicable to 21 CCLC include: (1) Expenditures must be allowable under 2 CFR §200.403 (federal cost principles) and align with the grant’s specific terms and objectives and (2) Documentation of expenditures must meet the standards outlined in 2 CFR §200.302 (financial management and internal controls). Condition: In September 2024, legal counsel conducted a formal investigation and identified a potential misappropriation of funds regarding a vendor who submitted twelve invoices for goods and services to be used by children in the after-school programs across three Paterson schools amounting to $94,560 during a nine-month period covering May 2023 through February 2024. According to the formal investigation, there was insufficient evidence that the Organizations actually received the goods and services purchased from this vendor as shipping receipts, purchase orders or other verification support were not provided. Payments were made to the vendor with only an approved invoice. Cause: The lack of proper support documentation stems from insufficient internal controls over compliance due to inadequate segregation of duties, training and understanding of federal grant compliance requirements by staff responsible for grant administration as well as weak management oversight. The Organizations’ grant program administrators lack proper segregation of duties. There should be different individuals responsible for initiating purchase orders, receiving goods, approving invoices, and processing payments. There is no consistent oversight over expense/vendor verification and proper documentation processes, which include purchase orders and receiving reports that must be attached to invoices for verification. Effect: The Organizations’ 21 CCLC grant program was not in compliance with the federal grant terms and conditions, which can result in a potential repayment or “clawback” of misused grant funds by the grantor due to unverified expenditures and also lead to audit penalties or loss of future funding. Questioned Costs: $94,560. Repeat Finding: No. Recommendations: We recommend that the Organizations implement policies and procedures to comply with the federal grant terms and conditions in an effort to provide proper support documentation for verification of the existence that goods were received and services performed. These policies include the following: Recommendation #1 – A policy implemented for deliveries that arrive at the Organizations and that are made directly to the schools (“Units”). The arrival of a delivery must be documented at the Organizations and any deliveries made to the Units must be documented by the Unit Director and/or the individual who is making the delivery. All receiving reports and receipts should be matched to an invoice. Recommendation #2 – The Organizations must renew and enforce its policies regarding documentation the Units are responsible for submitting to the Program Director and/or the Organizations to ensure supplies and materials are received as well as activities and events provided by grant funds are properly documented and maintained. (1) There must be a policy related to the use of daily reports (known as “End of Day Reports”) that Unit Directors submit to the Program Director. The reports should be a template created by the Organizations or Program Director that the Unit Directors have available to them, which must identify what activities occurred on that day, whether parents were provided with anything at drop off or given out to the children and whether the Units accepted any deliveries and from whom. (2) The Unit Directors must also maintain "sign-in sheets". A policy must also be implemented regarding the use of sign-in sheets at the Units. The policy should have a clear mandate, purpose and outline the significance of maintaining these sign-in sheets as it relates to the grant program. The sign-in sheets must contain the number of the Unit, the name of the Director and Assistant Director, the name and a description of the correlating activity or event, whether any items, supplies, materials or kits were given to the children during the activity or event or provided at pickup time for the children to use at home, the number of children that participated in the activity or event, as well as the date and approximate time. The sign-in sheets should be emailed to the Program Director who will need to save these sheets in an online file. These files must be kept separately in a repository for each specific Unit by grant year. Other documentation that should be kept on file to further support the events and activities that occurred includes pictures of the children using the materials or participating in the activity or event. Unit Directors must be required to submit these files to the Program Director within a specified amount of time following an event or activity. Views of Responsible Officials: See corrective action plan attached.
Assistance Listing Number(s): 10.912 Name of Federal Program or Cluster: Environmental Quality Incentives Program Name of Federal Agency: Department of Agriculture Award Periods: September 3, 2019 through July 31, 2024 and September 30, 2020 through September 30, 2025 Assistance Listing Number(s): 10.924 Name of Federal Program or Cluster: Conservation Stewardship Program Name of Federal Agency: Department of Agriculture Award Periods: September 3, 2019 through July 31, 2024 and September 30, 2020 through September 30, 2025 Criteria or Specific Requirement: 2 CFR Section 200.403 states the factors that determine allowability of costs charged to federal awards and requires costs to be determined in accordance with generally accepted accounting principles. Condition: We identified costs incurred in 2022 that were incorrectly recorded as 2023 costs and charged to federal awards. Cause: Management has not designed and implemented sufficient internal controls to ensure costs are recorded in accordance with generally accepted accounting principles to be allowable for federal awards. Effect or Potential Effect: An unallowable cost could be charged to the federal program. Context and Questioned Costs: During our testing of grants for appropriate accounting period cutoff, we identified 2022 costs that were charged to grants in 2023. Thus, we selected all grant transactions charged to the major program that were recorded in January 2023, and grant transactions over $2,500 for the period February 1, 2023 through June 30, 2023 to test for recognition in the proper period. The amount tested totaled $243,311, which included $12,726 of costs recorded in the wrong period. Other than not being recorded in accordance with generally accepted accounting principles, these costs were otherwise allowable and recorded in the proper period of performance. Repeat Finding: No Recommendation: We recommend management design and implement sufficient internal controls to ensure costs are recorded in accordance with generally accepted accounting principles to be allowable for federal awards. Views of Responsible Officials: Management agrees with the finding and they will evaluate our findings to determine an appropriate corrective action.
Assistance Listing Number(s): 10.912 Name of Federal Program or Cluster: Environmental Quality Incentives Program Name of Federal Agency: Department of Agriculture Award Periods: September 3, 2019 through July 31, 2024 and September 30, 2020 through September 30, 2025 Assistance Listing Number(s): 10.924 Name of Federal Program or Cluster: Conservation Stewardship Program Name of Federal Agency: Department of Agriculture Award Periods: September 3, 2019 through July 31, 2024 and September 30, 2020 through September 30, 2025 Criteria or Specific Requirement: 2 CFR Section 200.403 states the factors that determine allowability of costs charged to federal awards and requires costs to be determined in accordance with generally accepted accounting principles. Condition: We identified costs incurred in 2022 that were incorrectly recorded as 2023 costs and charged to federal awards. Cause: Management has not designed and implemented sufficient internal controls to ensure costs are recorded in accordance with generally accepted accounting principles to be allowable for federal awards. Effect or Potential Effect: An unallowable cost could be charged to the federal program. Context and Questioned Costs: During our testing of grants for appropriate accounting period cutoff, we identified 2022 costs that were charged to grants in 2023. Thus, we selected all grant transactions charged to the major program that were recorded in January 2023, and grant transactions over $2,500 for the period February 1, 2023 through June 30, 2023 to test for recognition in the proper period. The amount tested totaled $243,311, which included $12,726 of costs recorded in the wrong period. Other than not being recorded in accordance with generally accepted accounting principles, these costs were otherwise allowable and recorded in the proper period of performance. Repeat Finding: No Recommendation: We recommend management design and implement sufficient internal controls to ensure costs are recorded in accordance with generally accepted accounting principles to be allowable for federal awards. Views of Responsible Officials: Management agrees with the finding and they will evaluate our findings to determine an appropriate corrective action.
2023-004 Allowable Costs (Material Weakness) U.S. Department of Treasury 21.027 Coronavirus State and Local Fiscal Recovery Funds Criteria: The Uniform Guidance sets forth factors affecting allowability of costs. Except where otherwise authorized by statute, costs must meet the certain criteria to be allowable under federal awards. CFR 200.403 (c) states that costs must be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. CFR200.403(g) states that the cost must be adequately documented Condition: There were multiple amounts paid for which the Organization was unable to supply appropriate documentation and invoices or receipts for which the Organization did not follow their policy for reviewing the invoices/receipts prior to payment. Cause: The Organization uses Bill.com to make most payments. The payments made directly via an ACH with the bank do not have appropriate documentation maintained. There were also other payments for which the client was unable to locate the documents. There were also invoices/receipts that were not signed off prior to payment. Effect: The Organization has policies in place for amounts paid through Bill.com, but these policies are not being used with other forms of payments. Questioned Costs: $342.34. Questioned costs are made up of the total of all invoices tested that did not have appropriate documentation. Recommendation: Organization should update policy and ensure that all payments made in any form have appropriate documentation. Also, the Organization should follow their stated policy on review of invoices prior to payment. Views of Responsible Officials and Planned Corrective Actions: The Organization will update policy to ensure that all payments made in any form have appropriate documentation. Additionally, policy on review of invoices prior to payment will be reviewed by Executive Director and Business Manager. Monique Johnson, Executive Director of Allen County Drug & Alcohol Consortium, is responsible for this corrective action. The anticipated completion date is May 31, 2025.
2 C.F.R. § 1000.10 gives regulatory effect to the Department of the Treasurer for 2 C.F.R. § 200.403(a), which requires that costs be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. 2 C.F.R. § 200.403(c) documents that costs must be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. State ex rel. McClure v. Hagerman, 155 Ohio St. 320 (1951) provides that expenditures made by a governmental unit should serve a public purpose. Typically, the determination of what constitutes a “proper public purpose” rests with the judgment of the governmental entity, unless such determination is arbitrary or unreasonable. Even if a purchase is reasonable, Ohio Attorney General Opinion 82-006 indicates that it must be memorialized by a duly enacted ordinance or resolution and may have a prospective effect only. Auditor of State Bulletin 2003-005 Expenditure of Public Funds/Proper “Public Purpose” states, in part, the Auditor of State’s Office will only question expenditures where the legislative determination of a public purpose is manifestly arbitrary and incorrect. The Sheriff's Department was awarded the American Rescue Plan Funding for the Community Violence Intervention program to offer employee incentive and retention funds of $72,159 on October 14, 2022. The Sheriff's department completed the request for proposal for the grant based on May 2022 wages with an original grant period being April 2022 through April 2024. However, funding wasn't received until April 2023 and the Sheriff's Department received a grant extension through October 2024. The Sheriff's Clerk prepared a spreadsheet to base the retention and incentive payments on 10% of the annual salaries for dispatchers and deputies using their pay rates as of May 2022. This 10% annual amount was then to be paid over 24 months. There were to be bi-monthly payments for the period May 2022 through April 2024 for employee retention of deputies and dispatchers. Due to the delay of the grant start date, the first payment was made in 2023 and was a single payment to cover missed payments from May to December 2022 using the 2022 pay rates noted in the initial grant award calculation. Payment 1 in 2023 was for the four bi-monthly payments missed in 2022 (8 months) and payment 2 was for two bi-monthly payments (4 months) for January to April 2023. After these two payments, the Clerk changed the amounts being paid as the 10% limit would also need to cover the related county paid benefits on these retention and incentive payments which were not previously considered in the 10% maximum calculation. The Clerk recalculated the totals to be paid as salary payments by subtracting the related benefit total from the salary maximum previously calculated and dividing that amount over the remaining payments. She started paying lesser amounts for the subsequent bi-monthly payments, but we could not agree those amounts to support as calculations were not retained. Additionally, when the grant was finally received in 2023, there were employees that had been used in the initial calculation as of May 2022 that were no longer employed by the County. Since those employees did not receive any payments, the Clerk used the funding that was freed up from those employees to add newly hired employees to the retention and incentive payments. There was no supporting documentation on file for how new employees were added to the grant or how the amount allocated for new employees was calculated. While these payments were allowable for the purpose of retention of employees there were not sufficient internal controls in place for the calculation of the payments made over the life of the grant as the calculations changed throughout the year as employees left and were replaced. For most new employees, a bi-monthly flat rate not related to a percentage of their salary was paid. These flat rates were not approved by the Sheriff to be used in place of the 10% annual max calculations. Due to the lack of supporting documentation on file to determine how the Sheriff's Clerk calculated the retention payments to employees, we calculated a maximum of 10% annual salary per employee using 2022 hourly rates for those employed in 2022 and 2023 hourly rates for new employees in 2023. We then divided that amount by 24 months as the one year annual amount was to be paid across two years to get a monthly incentive amount and then multiplied the monthly amount by the number of months actually employed during the grant period. We compared our recalculated amounts to amounts actually paid through the final payment in 2024 to determine if there were any over payments over the life of the grant. We noted two of the twenty-three employees receiving retention and incentive payments in 2023 exceeded the 10% maximum. These employees were overpaid $192.53 and $261.03, respectively including salaries and related benefits. Both of these employees left employment in 2023 so they did not receive any further payments in 2024. These overpayments do not represent a proper public purpose. We further noted that amounts paid to employees from Payment 3 through Payment 6 covering May through December 2023 were not adequately documented as we could not recalculate the bi-monthly payments totaling $15,284 in salaries and $2,773 in related benefits. The Sheriff's office should implement procedures to ensure all supporting documentation for grant payments are maintained. Actual amounts paid by grant funds to employees should be supported by calculations and changes to the calculations should be approved.
2 C.F.R. § 1000.10 gives regulatory effect to the Department of the Treasurer for 2 C.F.R. § 200.403(a), which requires that costs be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. 2 C.F.R. § 200.403(c) documents that costs must be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. State ex rel. McClure v. Hagerman, 155 Ohio St. 320 (1951) provides that expenditures made by a governmental unit should serve a public purpose. Typically, the determination of what constitutes a “proper public purpose” rests with the judgment of the governmental entity, unless such determination is arbitrary or unreasonable. Even if a purchase is reasonable, Ohio Attorney General Opinion 82-006 indicates that it must be memorialized by a duly enacted ordinance or resolution and may have a prospective effect only. Auditor of State Bulletin 2003-005 Expenditure of Public Funds/Proper “Public Purpose” states, in part, the Auditor of State’s Office will only question expenditures where the legislative determination of a public purpose is manifestly arbitrary and incorrect. The Sheriff's Department was awarded the American Rescue Plan Funding for the Community Violence Intervention program to offer employee incentive and retention funds of $72,159 on October 14, 2022. The Sheriff's department completed the request for proposal for the grant based on May 2022 wages with an original grant period being April 2022 through April 2024. However, funding wasn't received until April 2023 and the Sheriff's Department received a grant extension through October 2024. The Sheriff's Clerk prepared a spreadsheet to base the retention and incentive payments on 10% of the annual salaries for dispatchers and deputies using their pay rates as of May 2022. This 10% annual amount was then to be paid over 24 months. There were to be bi-monthly payments for the period May 2022 through April 2024 for employee retention of deputies and dispatchers. Due to the delay of the grant start date, the first payment was made in 2023 and was a single payment to cover missed payments from May to December 2022 using the 2022 pay rates noted in the initial grant award calculation. Payment 1 in 2023 was for the four bi-monthly payments missed in 2022 (8 months) and payment 2 was for two bi-monthly payments (4 months) for January to April 2023. After these two payments, the Clerk changed the amounts being paid as the 10% limit would also need to cover the related county paid benefits on these retention and incentive payments which were not previously considered in the 10% maximum calculation. The Clerk recalculated the totals to be paid as salary payments by subtracting the related benefit total from the salary maximum previously calculated and dividing that amount over the remaining payments. She started paying lesser amounts for the subsequent bi-monthly payments, but we could not agree those amounts to support as calculations were not retained. Additionally, when the grant was finally received in 2023, there were employees that had been used in the initial calculation as of May 2022 that were no longer employed by the County. Since those employees did not receive any payments, the Clerk used the funding that was freed up from those employees to add newly hired employees to the retention and incentive payments. There was no supporting documentation on file for how new employees were added to the grant or how the amount allocated for new employees was calculated. While these payments were allowable for the purpose of retention of employees there were not sufficient internal controls in place for the calculation of the payments made over the life of the grant as the calculations changed throughout the year as employees left and were replaced. For most new employees, a bi-monthly flat rate not related to a percentage of their salary was paid. These flat rates were not approved by the Sheriff to be used in place of the 10% annual max calculations. Due to the lack of supporting documentation on file to determine how the Sheriff's Clerk calculated the retention payments to employees, we calculated a maximum of 10% annual salary per employee using 2022 hourly rates for those employed in 2022 and 2023 hourly rates for new employees in 2023. We then divided that amount by 24 months as the one year annual amount was to be paid across two years to get a monthly incentive amount and then multiplied the monthly amount by the number of months actually employed during the grant period. We compared our recalculated amounts to amounts actually paid through the final payment in 2024 to determine if there were any over payments over the life of the grant. We noted two of the twenty-three employees receiving retention and incentive payments in 2023 exceeded the 10% maximum. These employees were overpaid $192.53 and $261.03, respectively including salaries and related benefits. Both of these employees left employment in 2023 so they did not receive any further payments in 2024. These overpayments do not represent a proper public purpose. We further noted that amounts paid to employees from Payment 3 through Payment 6 covering May through December 2023 were not adequately documented as we could not recalculate the bi-monthly payments totaling $15,284 in salaries and $2,773 in related benefits. The Sheriff's office should implement procedures to ensure all supporting documentation for grant payments are maintained. Actual amounts paid by grant funds to employees should be supported by calculations and changes to the calculations should be approved.
2 C.F.R. § 1000.10 gives regulatory effect to the Department of the Treasurer for 2 C.F.R. § 200.403(a), which requires that costs be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. 2 C.F.R. § 200.403(c) documents that costs must be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. State ex rel. McClure v. Hagerman, 155 Ohio St. 320 (1951) provides that expenditures made by a governmental unit should serve a public purpose. Typically, the determination of what constitutes a “proper public purpose” rests with the judgment of the governmental entity, unless such determination is arbitrary or unreasonable. Even if a purchase is reasonable, Ohio Attorney General Opinion 82-006 indicates that it must be memorialized by a duly enacted ordinance or resolution and may have a prospective effect only. Auditor of State Bulletin 2003-005 Expenditure of Public Funds/Proper “Public Purpose” states, in part, the Auditor of State’s Office will only question expenditures where the legislative determination of a public purpose is manifestly arbitrary and incorrect. The Sheriff's Department was awarded the American Rescue Plan Funding for the Community Violence Intervention program to offer employee incentive and retention funds of $72,159 on October 14, 2022. The Sheriff's department completed the request for proposal for the grant based on May 2022 wages with an original grant period being April 2022 through April 2024. However, funding wasn't received until April 2023 and the Sheriff's Department received a grant extension through October 2024. The Sheriff's Clerk prepared a spreadsheet to base the retention and incentive payments on 10% of the annual salaries for dispatchers and deputies using their pay rates as of May 2022. This 10% annual amount was then to be paid over 24 months. There were to be bi-monthly payments for the period May 2022 through April 2024 for employee retention of deputies and dispatchers. Due to the delay of the grant start date, the first payment was made in 2023 and was a single payment to cover missed payments from May to December 2022 using the 2022 pay rates noted in the initial grant award calculation. Payment 1 in 2023 was for the four bi-monthly payments missed in 2022 (8 months) and payment 2 was for two bi-monthly payments (4 months) for January to April 2023. After these two payments, the Clerk changed the amounts being paid as the 10% limit would also need to cover the related county paid benefits on these retention and incentive payments which were not previously considered in the 10% maximum calculation. The Clerk recalculated the totals to be paid as salary payments by subtracting the related benefit total from the salary maximum previously calculated and dividing that amount over the remaining payments. She started paying lesser amounts for the subsequent bi-monthly payments, but we could not agree those amounts to support as calculations were not retained. Additionally, when the grant was finally received in 2023, there were employees that had been used in the initial calculation as of May 2022 that were no longer employed by the County. Since those employees did not receive any payments, the Clerk used the funding that was freed up from those employees to add newly hired employees to the retention and incentive payments. There was no supporting documentation on file for how new employees were added to the grant or how the amount allocated for new employees was calculated. While these payments were allowable for the purpose of retention of employees there were not sufficient internal controls in place for the calculation of the payments made over the life of the grant as the calculations changed throughout the year as employees left and were replaced. For most new employees, a bi-monthly flat rate not related to a percentage of their salary was paid. These flat rates were not approved by the Sheriff to be used in place of the 10% annual max calculations. Due to the lack of supporting documentation on file to determine how the Sheriff's Clerk calculated the retention payments to employees, we calculated a maximum of 10% annual salary per employee using 2022 hourly rates for those employed in 2022 and 2023 hourly rates for new employees in 2023. We then divided that amount by 24 months as the one year annual amount was to be paid across two years to get a monthly incentive amount and then multiplied the monthly amount by the number of months actually employed during the grant period. We compared our recalculated amounts to amounts actually paid through the final payment in 2024 to determine if there were any over payments over the life of the grant. We noted two of the twenty-three employees receiving retention and incentive payments in 2023 exceeded the 10% maximum. These employees were overpaid $192.53 and $261.03, respectively including salaries and related benefits. Both of these employees left employment in 2023 so they did not receive any further payments in 2024. These overpayments do not represent a proper public purpose. We further noted that amounts paid to employees from Payment 3 through Payment 6 covering May through December 2023 were not adequately documented as we could not recalculate the bi-monthly payments totaling $15,284 in salaries and $2,773 in related benefits. The Sheriff's office should implement procedures to ensure all supporting documentation for grant payments are maintained. Actual amounts paid by grant funds to employees should be supported by calculations and changes to the calculations should be approved.
2 C.F.R. § 1000.10 gives regulatory effect to the Department of the Treasurer for 2 C.F.R. § 200.403(a), which requires that costs be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. 2 C.F.R. § 200.403(c) documents that costs must be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. State ex rel. McClure v. Hagerman, 155 Ohio St. 320 (1951) provides that expenditures made by a governmental unit should serve a public purpose. Typically, the determination of what constitutes a “proper public purpose” rests with the judgment of the governmental entity, unless such determination is arbitrary or unreasonable. Even if a purchase is reasonable, Ohio Attorney General Opinion 82-006 indicates that it must be memorialized by a duly enacted ordinance or resolution and may have a prospective effect only. Auditor of State Bulletin 2003-005 Expenditure of Public Funds/Proper “Public Purpose” states, in part, the Auditor of State’s Office will only question expenditures where the legislative determination of a public purpose is manifestly arbitrary and incorrect. The Sheriff's Department was awarded the American Rescue Plan Funding for the Community Violence Intervention program to offer employee incentive and retention funds of $72,159 on October 14, 2022. The Sheriff's department completed the request for proposal for the grant based on May 2022 wages with an original grant period being April 2022 through April 2024. However, funding wasn't received until April 2023 and the Sheriff's Department received a grant extension through October 2024. The Sheriff's Clerk prepared a spreadsheet to base the retention and incentive payments on 10% of the annual salaries for dispatchers and deputies using their pay rates as of May 2022. This 10% annual amount was then to be paid over 24 months. There were to be bi-monthly payments for the period May 2022 through April 2024 for employee retention of deputies and dispatchers. Due to the delay of the grant start date, the first payment was made in 2023 and was a single payment to cover missed payments from May to December 2022 using the 2022 pay rates noted in the initial grant award calculation. Payment 1 in 2023 was for the four bi-monthly payments missed in 2022 (8 months) and payment 2 was for two bi-monthly payments (4 months) for January to April 2023. After these two payments, the Clerk changed the amounts being paid as the 10% limit would also need to cover the related county paid benefits on these retention and incentive payments which were not previously considered in the 10% maximum calculation. The Clerk recalculated the totals to be paid as salary payments by subtracting the related benefit total from the salary maximum previously calculated and dividing that amount over the remaining payments. She started paying lesser amounts for the subsequent bi-monthly payments, but we could not agree those amounts to support as calculations were not retained. Additionally, when the grant was finally received in 2023, there were employees that had been used in the initial calculation as of May 2022 that were no longer employed by the County. Since those employees did not receive any payments, the Clerk used the funding that was freed up from those employees to add newly hired employees to the retention and incentive payments. There was no supporting documentation on file for how new employees were added to the grant or how the amount allocated for new employees was calculated. While these payments were allowable for the purpose of retention of employees there were not sufficient internal controls in place for the calculation of the payments made over the life of the grant as the calculations changed throughout the year as employees left and were replaced. For most new employees, a bi-monthly flat rate not related to a percentage of their salary was paid. These flat rates were not approved by the Sheriff to be used in place of the 10% annual max calculations. Due to the lack of supporting documentation on file to determine how the Sheriff's Clerk calculated the retention payments to employees, we calculated a maximum of 10% annual salary per employee using 2022 hourly rates for those employed in 2022 and 2023 hourly rates for new employees in 2023. We then divided that amount by 24 months as the one year annual amount was to be paid across two years to get a monthly incentive amount and then multiplied the monthly amount by the number of months actually employed during the grant period. We compared our recalculated amounts to amounts actually paid through the final payment in 2024 to determine if there were any over payments over the life of the grant. We noted two of the twenty-three employees receiving retention and incentive payments in 2023 exceeded the 10% maximum. These employees were overpaid $192.53 and $261.03, respectively including salaries and related benefits. Both of these employees left employment in 2023 so they did not receive any further payments in 2024. These overpayments do not represent a proper public purpose. We further noted that amounts paid to employees from Payment 3 through Payment 6 covering May through December 2023 were not adequately documented as we could not recalculate the bi-monthly payments totaling $15,284 in salaries and $2,773 in related benefits. The Sheriff's office should implement procedures to ensure all supporting documentation for grant payments are maintained. Actual amounts paid by grant funds to employees should be supported by calculations and changes to the calculations should be approved.
Questioned Costs: $44,046 - The overbilled amount has been reclassified to a liability to the funder but has not been repaid or settled. Criteria: In accordance with 2 CFR § 200.403 and 2 CFR § 200.405, costs charged to federal awards must be allowable, allocable, and necessary to the performance of the federal award. Under the terms of a cost-reimbursement federal contract, as governed by 2 CFR § 200.403, § 200.404, and § 200.405, all costs charged to a federal award must be: • Actually incurred, • Allocable to the program, • Allowable under federal cost principles, and • Supported by adequate documentation. Under 2 CFR § 200.414 indirect costs may only be charged based on an approved rate (e.g., NICRA or de minimis), applied to the proper base and only if such costs are actually incurred during the performance period. Billing the full invoice amount of shared costs without allocating based on an approved indirect cost rate is not compliant with Uniform Guidance. Condition: The Organization billed indirect costs totaling $45,096 to a federal cost-reimbursement contract, despite not having incurred qualifying indirect costs during the contract period. The Organization charged entire invoice amounts for shared indirect costs. The billed amounts were based solely on the approved indirect cost rate applied to direct cost invoices, however, there is a maximum of $1,050 in actual indirect expenses for administrative support, or other shared costs incurred or allocated. Cause: The Organization misinterpreted the cost allocation rules and did not have an adequate process for applying the approved indirect cost rate. Billing practices defaulted to charging the entire invoice amount to federal awards when costs benefitted multiple programs. The Organization lacked adequate controls over indirect cost invoicing and did not perform timely reconciliations between budgeted and actual costs incurred. The outside accountant relied on budgeted percentages rather than actual expenses, and there was no final adjustment process in place to reconcile at year-end. Effect: The Organization received $44,046 in federal funds that were not supported by actual indirect costs incurred. These funds represent unallowable costs and are considered questioned costs under the Uniform Guidance. Identification of Repeat Finding ☐ Yes ☑ No Recommendation: We recommend that the Organization: • Implement policies and procedures to reconcile indirect costs billed to actual costs incurred. • Implement a post-invoicing reconciliation process to compare actual indirect costs with amounts billed. • Ensure that all invoicing for federal awards complies with the approved indirect cost rate agreement. • Return the $44,046 of unexpended indirect cost reimbursements to the granting agency. • Provide additional training to accounting and grants management staff on the treatment of indirect costs under 2 CFR Part 200.
Questioned Costs: $88,135 Criteria: In accordance with 2 CFR § 200.403–.405, costs charged to federal awards must be allowable, allocable, and supported by valid documentation. Additionally, under 2 CFR § 200.318–.320, all contracts must be awarded with clear terms and timeframes and must be executed prior to the provision of goods or services. For subawards, 2 CFR § 200.331 requires that subrecipient agreements be in writing and include all legally required terms and conditions. Payments made outside the terms of a written, active contract — particularly beyond expiration dates — may be deemed unallowable due to lack of legal obligation and documentation. Condition: Of the ten contracts selected for testing, seven were expired at the time payments were made. In total, the Organization paid $88,135 for services rendered beyond the contract end dates, including payments to one subrecipient and multiple consultants or contractors. The Organization indicated that all payments were budgeted within the approved federal grant agreements; however, these payments were not supported by amendments, extensions, or new agreements authorizing continued work or compensation. Additionally, in four additional instances, one selected for testing, contracts specified hourly or deliverable rates and defined service periods but contained inaccurate or inconsistent total compensation amounts. One of four contracts made payments under these agreements that exceeded the stated contract total. Overall, the discrepancies created ambiguity about the authorized funding limit and raise concerns about enforceability and allowability of the costs under federal award terms. Cause: The Organization did not have sufficient procedures in place to monitor contract expiration dates or to ensure that updated agreements were executed before authorizing payments. In these cases, services continued based on verbal agreements or historical practice rather than a valid, enforceable contract. Effect: As a result, $88,135 in costs were incurred and charged to the federal grant without a valid contractual basis. Even though the costs were budgeted, the lack of a valid, active contract invalidates the legal obligation required for allowability under 2 CFR § 200.403 and § 200.405. Therefore, the costs are questioned pending resolution with the federal awarding agency. Furthermore, the absence of executed agreements represents a significant internal control deficiency and increases the risk of unauthorized or disputed expenditures. The inconsistencies in contractual rates expose the Organization to the risk of paying amounts not clearly authorized by written agreements and may result in questioned or disallowed costs, especially if contract limits are exceeded. Weaknesses in contract drafting and review also constitute a significant deficiency in internal control over compliance. Identification of Repeat Finding: ☐ Yes ☑ No Recommendation: We recommend that the Organization: • Develop and implement a contract tracking system to monitor start and end dates. • Require that all contracts, extensions, and amendments be executed before services are rendered or payments are issued. • Provide training to program and procurement staff on federal procurement standards and contract management. • Review existing contracts to ensure compliance and take corrective action for any others that may have expired. • Work with the awarding agency to determine whether any portion of the $88,135 must be refunded.
2023-004 Eligibility Prior Year Finding Number: 2022-006 Year of Finding Origination: 2022 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of the Treasury Program: 21.023 COVID-19 – Emergency Rental Assistance Program Pass-Through Agency: N/A - Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The U.S. Department of the Treasury Frequently Asked Questions for Emergency Rental Assistance (ERA), revised July 27, 2022, requires grantees to obtain a current lease that identifies the unit where the applicant resides, to have support that an applicant is at risk of experiencing homelessness with a written attestation from the applicant or evidence of risk as determined by the grantee, have a reasonable basis for determining and redetermining income, and have documentation of the cost of any hotel or motel charged to the grant and the cost of the hotel or motel stay not include expenses incidental to the charge for the room. Title 2 U.S. Code of Federal Regulations § 200.403(g) requires costs to be adequately documented. In addition, the County’s Federal Emergency Program Guide for Tenant Application requires the County to obtain a written attestation if the Household has no qualifying income, or does not have documentation of all current income, and requires the County to use the Homeless Management Information System (HMIS) record when eligibility is based on homelessness. Condition: In a sample of 16 participant’s eligibility documentation tested, the following exceptions were detected: • For one participant, the address indicated on the ERA Request Form did not agree to the address included in the lease agreement. • Three participants did not have documentation to support that they were at risk of experiencing homelessness. • Three participants did not have documentation to support a reasonable basis for determining income. • Two participants did not have documentation to support a redetermination of income. • Three participants had instances where one-time payments, such as security deposits and application fees, were duplicated. • Thirteen participants did not have documentation originating from the hotel or shelter supporting payment amount and that incidental expenses were not included. • Eight participants had inconsistencies in the payment data provided between the participant name noted as the payee and the participant name noted as being applicable to in the transaction description. Questioned Costs: $140,822. Questioned costs are calculated based on payments to sampled participants. The amounts relating to costs that were not supported by adequate documentation at the time of the audit are $138,844, and amounts relating to duplicate payments are $1,978. These questioned costs were provided to a subrecipient that made the direct payments on behalf of participants. Context: The County had 80 total participants for the COVID-19 – Emergency Rental Assistance Program in 2023. The sample size was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The County is not in compliance with requirements of the U.S. Department of the Treasury and the County’s Program Guide for Tenant Application. Cause: The County informed us that documentation could not be located, and that a number of staff who were involved in the program are no longer a part of the department. In addition, the County informed us that it had a contract in place with a consultant to assist the County in housing participants. However, no documentation was provided supporting detailed hotel expenses. Lastly, the County informed us that the inconsistencies in the payment data appears to have been clerical mistakes. Recommendation: We recommend the County maintain documentation supporting participant eligibility in a location accessible to County staff. In addition, we recommend the County obtain documentation originating from hotels or shelters in sufficient detail as to provide support for costs charged to the grant and verify incidental expenses are not included. View of Responsible Official: Concur
Finding 2023-002: Significant Deficiency – Activities Allowed or Unallowed Assistance Listing Number (ALN): 93.788 Federal Program: Opioid STR Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: Minnesota Department of Human Services Federal Award Number: HT79TI083289 and H79TI085729 Federal Award Year: December 31, 2023 Criteria: 2 CFR 200.403(e) and (f) state that charges to federal awards must be determined in accordance with generally accepted accounting principles (GAAP) and be adequately documented. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; and support the distribution of the or costs among specific activities or cost objectives if the expenses supported more than one federal award, or a federal award and non-federal award Condition/Context: Six of the forty non-payroll transactions that were tested did not have evidence of approval for the amount allocated to the federal program, one transaction was recorded in the incorrect period and one transaction did not have evidence of receipt. The Organization experienced an unusually elevated level of turn-over of key personnel in business operations during the period of time that the control procedures lapsed as the individuals replacing those responsible for attaining allocation authorizations were not yet hired or fully trained in their assignments. The sample was not a statistically valid sample. Cause: The Organization's control process for expenditure authorizations was not properly implemented. Effect: Inadequate controls over the allocation of costs could result in unallowable costs being improperly applied to the federal program. Questioned Costs: Not required Recommendation: The Organization should have formal written procedure to ensure that all relevant authorization and reviews have been completed before allocating costs to federal programs. Views of responsible officials: Management agrees with the auditors' finding and will take action to implement controlling procedures over federal programs.
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Payroll Allocations and Contract Allocations Finding Number: 2023-005 Assistance Listing Number and Title: AL # 14.871 - Section 8 Housing Choice Vouchers/Housing Voucher Cluster Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Housing and Urban Development Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: N/A Repeat Finding from Prior Audit? Yes Prior Audit Finding Number: 2022-007 Noncompliance and Material Weakness 2 CFR § 2400.101 gives regulatory effect to the Department of Housing and Urban Development for 2 CFR Part 200 Subpart E § 200.403 which provides that, except where otherwise authorized by statute, costs must meet certain general criteria in order to be allowable under Federal awards including being necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and being adequately documented. 2 C.F.R. § 200.430 provides, in part, that costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities. The Authority utilizes a standard allocation of 85% to serve as a cost allocation plan for consultant contracts to the Housing Choice Voucher (HCV) Program. However, the percentages in the plan are not updated annually and the plan does not specify which expenses are subject to the allocation percentage. Further, the Authority was unable to provide supporting documentation for the allocation percentages in the plan. As such, during 2023, the Authority charged $9,068 to the Housing Voucher Cluster in excess of supported amounts. In addition, the Authority approved a standard allocation of 59% for employee benefits charged to the Housing Choice Voucher (HCV) Program. However, the Authority charged 85% of certain benefits for employees during 2023 resulting in $2,080 charged to the Housing Voucher Cluster in excess of supported amounts. The failure to update and support percentages used to allocate federal expenditures to ensure they are reasonable based on current activity could result in findings for adjustment or questioned costs in the federal programs. During 2023, the total unsupported charges totaled $11,148. The Authority should update the percentages used in its cost allocation plan. Further, the Authority should update its plan to identify which expenses are subject to allocation by this plan. In addition, the Authority should utilize only approved and supported percentages for allocation of federal expenditures.
Payroll Allocations and Contract Allocations Finding Number: 2023-005 Assistance Listing Number and Title: AL # 14.871 - Section 8 Housing Choice Vouchers/Housing Voucher Cluster Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Housing and Urban Development Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: N/A Repeat Finding from Prior Audit? Yes Prior Audit Finding Number: 2022-007 Noncompliance and Material Weakness 2 CFR § 2400.101 gives regulatory effect to the Department of Housing and Urban Development for 2 CFR Part 200 Subpart E § 200.403 which provides that, except where otherwise authorized by statute, costs must meet certain general criteria in order to be allowable under Federal awards including being necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and being adequately documented. 2 C.F.R. § 200.430 provides, in part, that costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities. The Authority utilizes a standard allocation of 85% to serve as a cost allocation plan for consultant contracts to the Housing Choice Voucher (HCV) Program. However, the percentages in the plan are not updated annually and the plan does not specify which expenses are subject to the allocation percentage. Further, the Authority was unable to provide supporting documentation for the allocation percentages in the plan. As such, during 2023, the Authority charged $9,068 to the Housing Voucher Cluster in excess of supported amounts. In addition, the Authority approved a standard allocation of 59% for employee benefits charged to the Housing Choice Voucher (HCV) Program. However, the Authority charged 85% of certain benefits for employees during 2023 resulting in $2,080 charged to the Housing Voucher Cluster in excess of supported amounts. The failure to update and support percentages used to allocate federal expenditures to ensure they are reasonable based on current activity could result in findings for adjustment or questioned costs in the federal programs. During 2023, the total unsupported charges totaled $11,148. The Authority should update the percentages used in its cost allocation plan. Further, the Authority should update its plan to identify which expenses are subject to allocation by this plan. In addition, the Authority should utilize only approved and supported percentages for allocation of federal expenditures.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
Finding No.2023-003: Improve Controls Over Expense Reporting and Payroll Charges Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entity: 1. San Diego Refugee Communities Coalition/United Women of East Africa Support Team 2. California Department of Social Services (CDSS) Federal Award Number: 1. Not available in the contract 2. ACS22-05-CAIR-A1 Federal Award Year: 1. February 1, 2023 – March 31, 2024 2. November 1, 2022 – March 31, 2025 Compliance Requirement: Allowable Costs/Cost Principles Criteria or Specific Requirements: In accordance with 2 CFR 200.403 and 200.405, costs charged to a federal award must be necessary, reasonable, and allocable. In addition, 2 CFR 200.430 Compensation-personal services, provides that compensation for personal services must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our testing of 21 non-payroll expenses, we identified one instance wherein translation services amounting to $795, provided by a staff member, were charged under professional fees, even though the individual's salary was recorded and billed under salary expenses. Additionally, in our testing of 25 payroll expenses, we identified one instance of overbilling in the amount $622. This occurred because the payroll charge was based on budgeted Full Time Equivalents (FTEs) rather than the actual time worked. Cause: CAIR-CA's current internal controls for reviewing billings under the federal program were not sufficient to consistently prevent or detect duplicate or inaccurate charges. Furthermore, CAIR-CA lacked adequate internal controls to ensure that payroll allocations were based on actual time worked on the federal program. Effect: These control deficiencies resulted in the overbilling of federal funds. Questioned Cost: $1,417 Recommendation: To ensure compliance with the Uniform Guidance, we recommend that CAIR-CA strengthen its internal controls over expense reporting by implementing enhanced review procedures to verify the allowability of costs charged to federal awards. Additionally, CAIR-CA should establish formal procedures to ensure that payroll charges to federal programs are based on actual time and effort records. Management should conduct regular reviews and make necessary adjustments to payroll allocations to accurately reflect the work performed on federally funded activities. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and has already initiated enhancements to its review process to ensure that expense reports are consistently reviewed and approved by both supervisors and finance personnel prior to being charged to federal awards. These steps are designed to further strengthen internal controls and support compliance with federal requirements. In addition, Finance staff are formalizing procedures to reconcile payroll charges on a regular basis to ensure compliance with federal requirements and to confirm that all charges to federal programs are supported by actual time and effort records. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: October 31, 2025
Finding No.2023-003: Improve Controls Over Expense Reporting and Payroll Charges Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entity: 1. San Diego Refugee Communities Coalition/United Women of East Africa Support Team 2. California Department of Social Services (CDSS) Federal Award Number: 1. Not available in the contract 2. ACS22-05-CAIR-A1 Federal Award Year: 1. February 1, 2023 – March 31, 2024 2. November 1, 2022 – March 31, 2025 Compliance Requirement: Allowable Costs/Cost Principles Criteria or Specific Requirements: In accordance with 2 CFR 200.403 and 200.405, costs charged to a federal award must be necessary, reasonable, and allocable. In addition, 2 CFR 200.430 Compensation-personal services, provides that compensation for personal services must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our testing of 21 non-payroll expenses, we identified one instance wherein translation services amounting to $795, provided by a staff member, were charged under professional fees, even though the individual's salary was recorded and billed under salary expenses. Additionally, in our testing of 25 payroll expenses, we identified one instance of overbilling in the amount $622. This occurred because the payroll charge was based on budgeted Full Time Equivalents (FTEs) rather than the actual time worked. Cause: CAIR-CA's current internal controls for reviewing billings under the federal program were not sufficient to consistently prevent or detect duplicate or inaccurate charges. Furthermore, CAIR-CA lacked adequate internal controls to ensure that payroll allocations were based on actual time worked on the federal program. Effect: These control deficiencies resulted in the overbilling of federal funds. Questioned Cost: $1,417 Recommendation: To ensure compliance with the Uniform Guidance, we recommend that CAIR-CA strengthen its internal controls over expense reporting by implementing enhanced review procedures to verify the allowability of costs charged to federal awards. Additionally, CAIR-CA should establish formal procedures to ensure that payroll charges to federal programs are based on actual time and effort records. Management should conduct regular reviews and make necessary adjustments to payroll allocations to accurately reflect the work performed on federally funded activities. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and has already initiated enhancements to its review process to ensure that expense reports are consistently reviewed and approved by both supervisors and finance personnel prior to being charged to federal awards. These steps are designed to further strengthen internal controls and support compliance with federal requirements. In addition, Finance staff are formalizing procedures to reconcile payroll charges on a regular basis to ensure compliance with federal requirements and to confirm that all charges to federal programs are supported by actual time and effort records. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: October 31, 2025
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. This is a repeat finding (2022-002) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City. EFFECT: The lack of procedures in place for maintaining a formal general ledger system of accounting for all ‘Funds’ of the City 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: The City began the process during calendar year 2019 of creating general ledgers on the computer accounting software system for all funds of the City, however due to changes in business office personnel, and other workload responsibilities, the City has not been able to fully complete this process. RECOMMENDATION: I am recommending that the City continue the process of making sure the financial activity for all funds individually is entered into the software accounting system. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
FINDING 2023-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): IN0263 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context Prior to receipt of direct State and Local Fiscal Recovery Funds (SLFRF) award funds, all eligible entities were required to execute a Financial Assistance Agreement (Agreement), which included the award terms and conditions that recipients must comply with in carrying out the objectives of their award. Per the Agreement, the City was responsible for the effective administration of the federal award, as well as the application of sound management practices and administration of federal funds in a manner consistent with program objectives and terms and conditions of the award. Activities Allowed or Unallowed, Allowable Costs/Cost Principles As part of sound management of the federal award, the City was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The City had not properly designed or implemented such a system. There was no evidence of segregation of duties, such as an oversight, review, or approval process related to these expenditures that would have ensured that expenditures of award funds were made only for activities and costs that were allowable under the federal award and federal regulations. The City passed Ordinance 2022-45 approving a "commitment of up to but not to exceed $400,000 for Infrastructure at the Junction." However, the City made no formal agreements for the payment of claims in relation to the "Junction" Project. Of the ten claims paid with SLFRF funds during 2023, two claims totaling $400,000 were for the "Junction" project. Both claims were paid without itemized invoices and adequate supporting documentation to support amounts paid. INDIANA STATE BOARD OF ACCOUNTS 19 CITY OF LOGANSPORT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, the City did not ensure a proper system of internal controls was in place to accurately track expenditures for the SLFRF grant. In 2022, $2.5 million of SLFRF grant funds were transferred out of the City's SLFRF fund into the City of Logansport Project Fund at a financial institution in the name of the City (bank account) and were subsequently comingled with other nonfederal funds as part of a Build Operate Transfer (BOT) Agreement. Of this $2.5 million, $1,626,043 was spent during 2022, leaving $873,957 of the original $2.5 million to be spent in 2023. During 2023, the City disbursed $4,369,454 from its BOT bank account, where SLFRF and other funding sources were comingled without tracking which expenditures were expressly for the purpose of SLFRF. It was not possible to obtain a population of federal expenditures for the BOT expenditures due to this comingling; therefore, a portion of the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements could not be tested. Costs totaling $1,273,957 were not properly documented and were considered questioned costs. The lack of internal controls and noncompliance was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302 states in part: "(a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. . . . (b) The financial management system of each non-Federal entity must provide for the following . . . (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. INDIANA STATE BOARD OF ACCOUNTS 20 CITY OF LOGANSPORT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. (4) Effective control over, and accountability for, all funds, property, and other assets. . . ." 2 CFR 200.400 states in part: "The application of these cost principles is based on the fundamental premises that: (a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. (c) The non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award. . . ." 2 CFR 200.403(g) states in part: "Be adequately documented. . . ." 2 CFR 200.404 states in part: "A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non- Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: . . . (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award's cost." Cause Due to the lack of internal controls, the City was unable to differentiate expenditures made from federal and nonfederal funds once it commingled nonfederal funds and federal grant awards in a single bank account. Additionally, the City did not obtain appropriate supporting documentation for federal expenditures. INDIANA STATE BOARD OF ACCOUNTS 21 CITY OF LOGANSPORT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The City was unable to identify all the expenditures paid with federal funds and cannot ensure, nor can we determine, expenditures of the grant were not unallowable and adhered to established practices and polices. This could result in the misuse of funds and the potential loss of funding for future federal awards. Questioned Costs We identified $1,273,957 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that management of the City establish a system of internal controls to ensure that grant award funds are accounted for and tracked in a designated grant fund. All activity of the grant should be in this fund with supporting documentation for each transaction. Additionally, the City should obtain appropriate supporting documentation for all federal grant expenditures. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding #2023-005 Federal Program: 21.027 - Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Repeat Finding: No Condition: During our audit of CSLFRF expenditures, we noted that the Organization charged $37,600 in office rent costs entirely to one CSLFRF grant (CSLFRF – Juntos). However, the rented office space was used to support activities under the CSLFRF – Juntos grant, a separate CSLFRF grant (CSLFRF – Centro Comunitario) and the general operations of the Organization. The Organization did not allocate rent costs between the two grants and general operations based on relative benefits received, resulting in an improper direct charge to a single award. Criteria: Per 2 CFR § 200.405, costs must be allocated to federal awards in accordance with the relative benefits received. Additionally, 2 CFR § 200.403 requires that costs charged to federal awards be necessary, reasonable, and allocable. Costs benefiting more than one award should be distributed among those awards to reflect the proportionate benefit each award received. Cause: The Organization did not properly implement procedures to allocate shared costs among multiple federal awards, resulting in the entire rent expense being charged to a single grant rather than distributed proportionally between both CSLFRF grants. Effect: The Organization has two grants under the CSLFRF program (Juntos Adelante and Centro Communitario Adelante on the Schedule of Expenditures of Federal Awards). The Organization charged $37,600 to the Juntos Adelante grant; however, determined that $4,324 should have been expensed under the Centro Communitario Adelante grant and $8,836 should not have been charged to either grant based on the proportionate benefit. Context: During testing of rent expenditures for the CSLFRF program, we noted the Organization’s lease agreement covered office space used by staff working on both Grant A and Grant B. The Organization confirmed no cost allocation methodology was used to split costs between the grants. Questioned Costs: See “Effect” Recommendation: We recommend that the Organization reallocate rent costs between the CSLFRF grants in accordance with the relative benefit each grant receives; develop and implement written procedures to allocate shared costs appropriately among federal awards; provide training to accounting staff on cost allocation requirements under Uniform Guidance. Reporting Views of Responsible Officials: Management concurs with the finding and will develop an allocation methodology for shared costs and reclassify expenses between CSLFRF grants. Management will work with the grantor to correct the costs charged to each grant.
Criteria: Under the Uniform Guidance, specifically 2 CFR 200.430, charges to Federal awards for compensation must be supported by a system of internal control which provides reasonable assurance that costs are allocated appropriately and accurately. Per 2 CFR §200.403, allowable costs must be "necessary, reasonable, and adequately documented." Additionally, 2 CFR §200.302(b)(3) requires non-Federal entities to maintain records that sufficiently detail financial transactions to support Federal expenditures. Condition: During our testing of payments charged to the federal major program, we noted that employee timesheets lacked evidence of review and approval. Certain employees charged to the grant did not prepare timesheets and a separate tracking system was used. Federal regulations require that expenditures charged to Federal awards be properly reviewed, approved, and documented to ensure allowability and compliance with grant terms. Cause: The Federal program was new to the organization and controls over the program had not been fully established. Turnover in the accounting department contributed to the lack of resources for tracking these costs. Effect or potential effect: Management provided documentation on personnel costs allocated to the program, but was unable to provide evidence of review. Lack of review increases the risk of unauthorized or unallowable costs being charged to the Federal award, potentially leading to questioned costs and noncompliance with Federal grant requirements. Context: This issue applied to less than 10% of the grant expenditures, $54,505 out of the $897,736 of total expenditures charged to the grant. Recommendation: Management should review the requirements of CFR 200.430 and ensure that current processes, whether digital or hard-copy driven, are consistent with the requirements of the Uniform Guidance. In addition, management should consider adding additional staff to its accounting and/or grants management team. Views of responsible officials: Management will evaluate systems and processes to ensure time tracking procedures meet the standards outlined in the Uniform Guidance.
2023 – 005 Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Low-Income Home Energy Assistance Program (LIHEAP) Assistance Listing Number: 93.568 Federal Award Identification Number and Year: G-2302ILLIEA 10/1/2022; G-2202ILLIEA 10/1/2021 Pass-Through Agency: Illinois Department of Commerce and Economic Opportunity Pass-Through Numbers: 23-221038; 22-224038 Award Period: June 1, 2023 through September 30, 2024 and October 1, 2021 through June 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires non-federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Uniform Grant Guidance (2 CFR 200.308, 200.309, and 200.403(h)) requires non-federal entities charge only allowable costs incurred during the approved budget period of a general award’s period of performance. Effective internal controls should include procedures to ensure transactions for costs recorded for the beginning of the period of performance were not incurred prior to the start of the period of performance and transactions for cost recorded for the end of the period of performance were not incurred after the end of the period of performance for Federal awards. Condition: The County allocated costs to federal awards prior to the beginning of the period of performance and after the end of the period of performance. Questioned costs: $31,837 Context: 9 of 10 transactions tested were incurred prior to the period of performance and 1 of 15 transactions tested were incurred after the period of performance end date. Cause: Costs were inadvertently claimed that fell outside the period of performance. Effect: May result in unallowable costs being charged to the Federal program. Repeat Finding: This finding is a partial repeat of a finding in the prior year. The prior year finding number was 2022-005. Recommendation: We recommend the County review its procedures relative to allocating costs to Federal programs, and ensure only cost within the grant period are included. Views of responsible officials: There is no disagreement with the audit finding.
2023 – 005 Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Low-Income Home Energy Assistance Program (LIHEAP) Assistance Listing Number: 93.568 Federal Award Identification Number and Year: G-2302ILLIEA 10/1/2022; G-2202ILLIEA 10/1/2021 Pass-Through Agency: Illinois Department of Commerce and Economic Opportunity Pass-Through Numbers: 23-221038; 22-224038 Award Period: June 1, 2023 through September 30, 2024 and October 1, 2021 through June 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires non-federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Uniform Grant Guidance (2 CFR 200.308, 200.309, and 200.403(h)) requires non-federal entities charge only allowable costs incurred during the approved budget period of a general award’s period of performance. Effective internal controls should include procedures to ensure transactions for costs recorded for the beginning of the period of performance were not incurred prior to the start of the period of performance and transactions for cost recorded for the end of the period of performance were not incurred after the end of the period of performance for Federal awards. Condition: The County allocated costs to federal awards prior to the beginning of the period of performance and after the end of the period of performance. Questioned costs: $31,837 Context: 9 of 10 transactions tested were incurred prior to the period of performance and 1 of 15 transactions tested were incurred after the period of performance end date. Cause: Costs were inadvertently claimed that fell outside the period of performance. Effect: May result in unallowable costs being charged to the Federal program. Repeat Finding: This finding is a partial repeat of a finding in the prior year. The prior year finding number was 2022-005. Recommendation: We recommend the County review its procedures relative to allocating costs to Federal programs, and ensure only cost within the grant period are included. Views of responsible officials: There is no disagreement with the audit finding.
2023 – 005 Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Low-Income Home Energy Assistance Program (LIHEAP) Assistance Listing Number: 93.568 Federal Award Identification Number and Year: G-2302ILLIEA 10/1/2022; G-2202ILLIEA 10/1/2021 Pass-Through Agency: Illinois Department of Commerce and Economic Opportunity Pass-Through Numbers: 23-221038; 22-224038 Award Period: June 1, 2023 through September 30, 2024 and October 1, 2021 through June 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires non-federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Uniform Grant Guidance (2 CFR 200.308, 200.309, and 200.403(h)) requires non-federal entities charge only allowable costs incurred during the approved budget period of a general award’s period of performance. Effective internal controls should include procedures to ensure transactions for costs recorded for the beginning of the period of performance were not incurred prior to the start of the period of performance and transactions for cost recorded for the end of the period of performance were not incurred after the end of the period of performance for Federal awards. Condition: The County allocated costs to federal awards prior to the beginning of the period of performance and after the end of the period of performance. Questioned costs: $31,837 Context: 9 of 10 transactions tested were incurred prior to the period of performance and 1 of 15 transactions tested were incurred after the period of performance end date. Cause: Costs were inadvertently claimed that fell outside the period of performance. Effect: May result in unallowable costs being charged to the Federal program. Repeat Finding: This finding is a partial repeat of a finding in the prior year. The prior year finding number was 2022-005. Recommendation: We recommend the County review its procedures relative to allocating costs to Federal programs, and ensure only cost within the grant period are included. Views of responsible officials: There is no disagreement with the audit finding.
2023 – 005 Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Low-Income Home Energy Assistance Program (LIHEAP) Assistance Listing Number: 93.568 Federal Award Identification Number and Year: G-2302ILLIEA 10/1/2022; G-2202ILLIEA 10/1/2021 Pass-Through Agency: Illinois Department of Commerce and Economic Opportunity Pass-Through Numbers: 23-221038; 22-224038 Award Period: June 1, 2023 through September 30, 2024 and October 1, 2021 through June 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires non-federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Uniform Grant Guidance (2 CFR 200.308, 200.309, and 200.403(h)) requires non-federal entities charge only allowable costs incurred during the approved budget period of a general award’s period of performance. Effective internal controls should include procedures to ensure transactions for costs recorded for the beginning of the period of performance were not incurred prior to the start of the period of performance and transactions for cost recorded for the end of the period of performance were not incurred after the end of the period of performance for Federal awards. Condition: The County allocated costs to federal awards prior to the beginning of the period of performance and after the end of the period of performance. Questioned costs: $31,837 Context: 9 of 10 transactions tested were incurred prior to the period of performance and 1 of 15 transactions tested were incurred after the period of performance end date. Cause: Costs were inadvertently claimed that fell outside the period of performance. Effect: May result in unallowable costs being charged to the Federal program. Repeat Finding: This finding is a partial repeat of a finding in the prior year. The prior year finding number was 2022-005. Recommendation: We recommend the County review its procedures relative to allocating costs to Federal programs, and ensure only cost within the grant period are included. Views of responsible officials: There is no disagreement with the audit finding.
2023-001 – Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles Information on Federal Program(s) - Department of Education Assistance Listing Number: 84.351 Assistance Listing Name: Arts in Education National Program Grant Award Numbers: S351A220007 Award Period: October 1, 2022 to September 30, 2023 Criteria or Specific Requirement – The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federallyfinanced program in either the current or a prior period. (g) Be adequately documented. (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).” Condition – In evaluating the Center’s compliance with the requirements of Activities Allowed or Unallowed and Allowable Costs Cost Principles, our test work identified two instances out of a sample of sixty payroll transactions, totaling $41,872.98, in which employees were not paid according to their contract. For the two exceptions, the employees were underpaid a total of $1.48. Cause – The Center did not adhere to their internal process to ensure approved salary information was accurately applied. Effect or Potential Effect – Without adequate internal controls in place to ensure costs are properly verified and applied, the Center could inaccurately charge expenditures to the federal program. Questioned Costs – N/A Context – This is a condition based on testing of the Center’s compliance. Based on tested samples, we noted a total underpayment of $1.48. The prevalence of the finding is detailed in the condition section above. The samples were selected using a non-statistical method. Repeat Finding – This is a repeat finding from prior year. While the prior year finding resulted in a net overpayment and current year finding resulted in a net underpayment, the fact that management is not adhering to their internal control processes requires this finding to be considered a repeat finding. This was reported as finding 2022-002 in the 2022 report. Recommendation - We recommend management ensure the Center strengthen their internal process to ensure that employee salary information recorded in the payroll system are approved, supported by salary documentation in the personnel files, and accurately applied. Views of Responsible Officials – After performing a detailed analysis, the Center’s management identified that the likely net underpayment amounted to $111.52, while the likely net overpayment was $83.20. The likely underpayment and overpayment were determined by management through examination of the total salary charged to the federal program. The Center’s management agrees with the finding and will strengthen the internal process surrounding the activities allowed or unallowed and allowable costs and will ensure adequate documentation is in place and approved salary rates are consistently and properly applied. See the Center’s corrective action for more details.
2023-001 – Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles Information on Federal Program(s) - Department of Education Assistance Listing Number: 84.351 Assistance Listing Name: Arts in Education National Program Grant Award Numbers: S351A220007 Award Period: October 1, 2022 to September 30, 2023 Criteria or Specific Requirement – The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federallyfinanced program in either the current or a prior period. (g) Be adequately documented. (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).” Condition – In evaluating the Center’s compliance with the requirements of Activities Allowed or Unallowed and Allowable Costs Cost Principles, our test work identified two instances out of a sample of sixty payroll transactions, totaling $41,872.98, in which employees were not paid according to their contract. For the two exceptions, the employees were underpaid a total of $1.48. Cause – The Center did not adhere to their internal process to ensure approved salary information was accurately applied. Effect or Potential Effect – Without adequate internal controls in place to ensure costs are properly verified and applied, the Center could inaccurately charge expenditures to the federal program. Questioned Costs – N/A Context – This is a condition based on testing of the Center’s compliance. Based on tested samples, we noted a total underpayment of $1.48. The prevalence of the finding is detailed in the condition section above. The samples were selected using a non-statistical method. Repeat Finding – This is a repeat finding from prior year. While the prior year finding resulted in a net overpayment and current year finding resulted in a net underpayment, the fact that management is not adhering to their internal control processes requires this finding to be considered a repeat finding. This was reported as finding 2022-002 in the 2022 report. Recommendation - We recommend management ensure the Center strengthen their internal process to ensure that employee salary information recorded in the payroll system are approved, supported by salary documentation in the personnel files, and accurately applied. Views of Responsible Officials – After performing a detailed analysis, the Center’s management identified that the likely net underpayment amounted to $111.52, while the likely net overpayment was $83.20. The likely underpayment and overpayment were determined by management through examination of the total salary charged to the federal program. The Center’s management agrees with the finding and will strengthen the internal process surrounding the activities allowed or unallowed and allowable costs and will ensure adequate documentation is in place and approved salary rates are consistently and properly applied. See the Center’s corrective action for more details.